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December 10, 2008

DOL Guidance Relating to ERISA’s Bonding Requirement

The Department of Labor recently provided guidance relating to the ERISA bonding requirement.  This guidance is provided in the form of Field Assistance Bulletin (‘FAB’) 2008-04, directed to the DOL’s field offices. 

ERISA §412 provides that officials of ERISA plans who handle plan funds must be bonded.  This bond is to protect the plan against fraud or dishonesty.  It is not the same as fiduciary liability coverage.  The obligation is to ensure that all plan officials handling plan assets are bonded. This FAB underscores the fact that ensuring compliance with the bonding requirement is a fiduciary act. 

Following are other hi-lites of the FAB:

  • Plan assets can be used to purchase a bond as long as the terms of the plan allow it. 
  • A single bond can insure multiple plan officials and multiple plans, as long as the bond terms are sufficient to satisfy the ERISA requirements for each plan.
  • A surety bond, generally, must be obtained from an approved surety company.  The approved surety companies are listed in the Treasury Department’sCircular 570.

This FAB is a good reminder for plans as they come to year-end review for compliance purposes, and to ensure that all plan officials are properly bonded.

 

The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

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